Virginia looks to reboot its economic development efforts after critical review

Virginia’s top economic development agency is reorganizing itself in the wake of a blistering 2016 audit report that found the agency was not effectively managed and put the state at risk of fraud and wasteful spending.

The Virginia Economic Development Partnership (VEDP), which awarded close to $400 million to companies over the past 10 years, lacked sufficient checks and balances and failed to verify that firms receiving economic development grants were keeping their promises, according to the report issued last December by the Joint Legislative Audit and Review Commission (JLARC).

Barry DuVal, president of the Virginia Chamber of Commerce and a former secretary of commerce and trade, termed the audit report damaging but accurate.

“I really think the General Assembly responded effectively in demanding change and set forth a number of items that needed to be addressed,” DuVal told Watchdog.org.

The way that the VEDP doled out economic development grants in the past understandably raised concern among those serving on the legislative watchdog panel, he said.

“Grants were issued in the past that should have had more vetting and more due diligence prior to releasing state funds,” DuVal said.

Stephen Moret, who took over as VEDP president and CEO in January, said the partnership is in the process of carrying out 27 recommendations in the audit report that are under the VEDP’s control. And Moret offers a spirited defense of any accusation that the VEDP is engaged in corporate welfare by providing companies with financial incentives to locate or expand in the commonwealth.

“First of all, it’s important to understand that Virginia is one of the smallest incentive states in America,” Moret told Watchdog.org, adding that the state gives our relatively small incentive packages to businesses.

“It’s not about the companies’ welfare,” he said. “It’s about the welfare of our economy.”

In the future, the VEDP will be a lot less focused on incentives as an economic development tool, according to Moret. Instead, the partnership will be looking more to improve workforce development, expand broadband access and generally make the state a more attractive place for investment, he said.

Virginia already has the built-in advantages of having public schools and institutions of higher education that are among the best in the nation, along with one of the best overall business climates, Moret said.

Current changes at the VEDP are about two key issues, one of which is to address all the shortcomings mentioned in the legislative audit, he said. The second is more broad-based.

“If you think about Virginia, this is one of America’s premier states, so we want to create a state economic development organization that is equal to the aspirations that we have for Virginia,” Moret said.

The VEDP will report back to the General Assembly before the end of the year, and he expects to be able to say that the clear majority of the recommendations will have been fulfilled. A timeline for whatever changes remain will also be laid out, Moret said.

Though the legislative audit focused on VEDP problems, it gave the agency high marks for its efforts at helping companies develop or expand their presence in international markets. The legislature passed a measure that would have shifted the international trade role to a separate agency, he said, but lawmakers eventually decided not to implement it.

“It will remain as a very important division of VEDP,” Moret said.

In fact, he said, the agency is working to expand that area so it has adequate staff to help more companies in the international arena. A 2015 Virginia Chamber of Commerce study found that between 2009 and 2014, 30 percent of the state’s job creation was related to exports.

The agency operates offices in the United Kingdom, China, Japan and India.

Another key area for the VEDP will be to work closely with community colleges and technical schools to create customized worker-training programs for in-demand jobs, Moret said, adding that companies’ site selections often hinge on having a skilled local workforce.

“We’re not currently a leader in state workforce development programs,” he said.

Among Moret’s overarching goals are to see the state add 75,000 jobs annually and to position every region of Virginia for economic growth.

Though some lawmakers reacted with alarm when the 2016 audit was released, they now seem optimistic about the VEDP’s reboot.

“I believe the VEDP is now functioning efficiently under its new leadership,” Delegate John O’Bannon III, R-Henrico, a member of the Appropriations Committee, told Watchdog.org in an email. “I am confident they will meet the JLARC recommendations and are well prepared to improve Virginia’s economic outlook.”

DuVal, the chamber president, said the VEDP, chamber and the Virginia Tech School of Business are currently working together to evaluate the state’s competitiveness and national business climate rankings, which have slipped somewhat in recent years. A report on how the state can improve the rankings will be released Dec. 1, he said.

DuVal expects the chamber and VEDP to continue working cooperatively in the years to come.

“The new leadership has brought the right vision and organization,” he said.